Question 1

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Accepted Answer

A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase. 
A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase.

Question 2

Jerry bought his home 15 years ago for $60,000.Three years ago Jerry married Debbie and she moved into the same house and has lived there since.If they sell Jerry's house in December,2013 for $340,000,what is their taxable gain on a joint tax return?

Accepted Answer

A) $0 
B) $280,000 
C) $155,000 
D) $30,000 
A) $0 
B) $280,000 
C) $155,000 
D) $30,000

Question 3

Taxpayers are allowed to offset net short-term capital losses with net long-term capital gains.

Accepted Answer

A) True 
 B)False

Question 4

In October of the current year,Mike sold a share of Berkshire-Hathaway for $73,000.He had acquired it several years ago at a cost of $38,000.He also sold Microsoft stock he had held for 3 years at a gain of
$17,000.He had a short-term $2,000 loss on the sale of stock of a start-up technical company.He has
$85,000 in taxable income before capital transactions are taken into account.What is the amount of Mike's tax on the capital transactions?

Accepted Answer

Based on his other taxable inc

Question 5

Accounts receivable are capital assets.

Accepted Answer

A) True 
 B)False

Question 6

Rod had the following loss on business-use property:

Accepted Answer

@#IMG-DLM& @#IMG-DLM& $200 long-term loss.The loss

Question 7

If property is received from a decedent,the taxpayer who inherits the property has the same basis in the property as the decedent.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true of a like-kind exchange:

Accepted Answer

A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal residences. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed. 
A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal residences. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed.

Question 9

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

Accepted Answer

A) True 
 B)False

Question 10

During 2013,Ethel exchanges a machine for another machine in a like-kind exchange.Ethel's adjusted basis in the machine given up is $8,000,and she receives a machine worth $12,000 plus $2,000 cash.
a.Calculate the amount of gain realized by Ethel on the exchange.
b.Calculate the amount of the gain that must be recognized by Ethel on the transaction.
c.Calculate Ethel's basis in the new machine.

Accepted Answer

a.$6,000 = $12,000 + 2,000 - 8

Question 11

In 2013,Penny exchanges an investment property in Santa Barbara with a mountain view for a lot with an ocean view in a qualifying like-kind exchange.Penny's basis in the land given up is $100,000 and the property has a fair market value of $250,000.In exchange for her property,Penny receives land with a fair market value of $200,000 and cash of $20,000.In addition,the other party to the exchange assumes a mortgage loan on Penny's property of $30,000.
a.Calculate Penny's realized gain,if any,on the exchange.
b.Calculate Penny's recognized gain,if any,on the exchange.
c.Calculate Penny's basis in the property received.

Accepted Answer

a.$150,000 = $200,000 + $20,00

Question 12

The exchange of shares of stock does not qualify for like-kind exchange treatment.

Accepted Answer

A) True 
 B)False

Question 13

The office building Donna owned and used for her desk-top publishing business was destroyed by a hurricane.Although the basis of the building was $80,000,Donna carried replacement cost insurance and received $160,000 from the insurance company after it was determined that the building was a complete loss.It cost her $152,000 to rebuild the store in 2014.
 a. Calculate Donna's recognized gain, assuming an election under the$\quad$$_______ involuntary
b. Calculate Donna's basis in the replacement building.$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$_______

Accepted Answer

a.A gain of $80,000 was realized,but onl

Question 14

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

Accepted Answer

A) True 
 B)False

Question 15

For purposes of taxation of capital gains:

Accepted Answer

A) Short-term capital gains are taxed at 5 percent. 
B) Ordinary income tax rates are applied to gains on collectibles. 
C) Gains on Section 1231 assets may be treated as long-term capital gains,while losses in some cases may be deducted as ordinary losses. 
D) Under the provisions of Section 1245,any gain recognized on the disposition of a Section 1245 asset will be classified as a capital gain. 
A) Short-term capital gains are taxed at 5 percent. 
B) Ordinary income tax rates are applied to gains on collectibles. 
C) Gains on Section 1231 assets may be treated as long-term capital gains,while losses in some cases may be deducted as ordinary losses. 
D) Under the provisions of Section 1245,any gain recognized on the disposition of a Section 1245 asset will be classified as a capital gain.

Question 16

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

Accepted Answer

A) True 
 B)False

Question 17

If property is inherited by a taxpayer,

Accepted Answer

A) To the recipient,the basis for the property is the same as the basis to the decedent. 
B) At sale date,the basis of the property to the recipient differs depending on whether the property was sold at a gain or a loss. 
C) At sale date,the recipient will not have a gain or loss even if the recipient has held the property for more than a year. 
D) In general,the basis to the recipient is the fair market value at the decedent's date of death. 
A) To the recipient,the basis for the property is the same as the basis to the decedent. 
B) At sale date,the basis of the property to the recipient differs depending on whether the property was sold at a gain or a loss. 
C) At sale date,the recipient will not have a gain or loss even if the recipient has held the property for more than a year. 
D) In general,the basis to the recipient is the fair market value at the decedent's date of death.

Question 18

The exchange of inventory does not qualify for like-kind exchange treatment.

Accepted Answer

A) True 
 B)False

Question 19

In 2013,Helen sold Section 1245 property for $6,000.The property cost $25,000 when it was purchased 5 years ago.The depreciation claimed on the property was $23,000.
a.Calculate the adjusted basis of the property.
b.Calculate the amount of ordinary income under Section 1245.
c.Calculate the Section 1231 gain.

Accepted Answer

a.$2,000 = $25,000 - $23,000
b

Question 20

Tim sells land to Brad for $75,000.Tim originally purchased the land for $50,000.Brad agrees to pay Tim five annual installments of $15,000 each.In year three,Brad makes his third installment of $15,000.How much taxable gain will Tim have in year three?

Accepted Answer

A) $30,000 
B) $20,000 
C) $5,000 
D) $10,000 
E) All the taxable gain should be recognized in year one 
A) $30,000 
B) $20,000 
C) $5,000 
D) $10,000 
E) All the taxable gain should be recognized in year one

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Jerry bought his home 15 years ago for $60,000.Three years ago Jerry married Debbie and she moved into the same house and has lived there since.If they sell Jerry's house in December,2013 for $340,000,what is their taxable gain on a joint tax return?

Taxpayers are allowed to offset net short-term capital losses with net long-term capital gains.

Accounts receivable are capital assets.

Rod had the following loss on business-use property:

If property is received from a decedent,the taxpayer who inherits the property has the same basis in the property as the decedent.

Which of the following is true of a like-kind exchange:

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

The exchange of shares of stock does not qualify for like-kind exchange treatment.

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

For purposes of taxation of capital gains:

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

If property is inherited by a taxpayer,

The exchange of inventory does not qualify for like-kind exchange treatment.

Tim sells land to Brad for $75,000.Tim originally purchased the land for $50,000.Brad agrees to pay Tim five annual installments of $15,000 each.In year three,Brad makes his third installment of $15,000.How much taxable gain will Tim have in year three?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 8: Capital Gains and Losses

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Jerry bought his home 15 years ago for $60,000.Three years ago Jerry married Debbie and she moved into the same house and has lived there since.If they sell Jerry's house in December,2013 for $340,000,what is their taxable gain on a joint tax return?

Taxpayers are allowed to offset net short-term capital losses with net long-term capital gains.

Accounts receivable are capital assets.

Rod had the following loss on business-use property:

If property is received from a decedent,the taxpayer who inherits the property has the same basis in the property as the decedent.

Which of the following is true of a like-kind exchange:

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

The exchange of shares of stock does not qualify for like-kind exchange treatment.

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

For purposes of taxation of capital gains:

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

If property is inherited by a taxpayer,

The exchange of inventory does not qualify for like-kind exchange treatment.

Tim sells land to Brad for $75,000.Tim originally purchased the land for $50,000.Brad agrees to pay Tim five annual installments of $15,000 each.In year three,Brad makes his third installment of $15,000.How much taxable gain will Tim have in year three?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters